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Lenders not adequately engaging with borrowers in arrears, says Central Bank

Regulator’s review highlights instances of ‘inadequate follow-up with borrowers’ and poor staff knowledge

Central Bank review finds that the quality of customer service is not yet where it needs to be. Photograph: PA

Eoin Burke-Kennedy
Wed Apr 24 2024 - 14:11

Lenders are often failing to adequately engage with borrowers experiencing early mortgage arrears, a review by the Central Bank has found.

The regulator carried out analysis of how lenders are dealing with borrowers in financial difficulties amid a pickup in short-term arrears, particularly among borrowers with nonbank lenders or so-called vulture funds, which typically charge higher rates of interest on loans.

Overall the review found the mortgage arrears resolution framework set out in the Central Bank’s code of conduct was “well positioned to support borrowers in or facing financial difficulty”.

“However, the review also found that the quality of customer service is not yet where it needs to be in the context of the specific challenges for borrowers facing early arrears at this time,” the Central Bank said.

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In particular it highlighted instances where there was “inadequate follow-up with borrowers which did not progress engagement or took lengthy periods of time”.

Staff knowledge of cases was at times found to be poor “which has resulted in unclear or incorrect information being provided to borrowers”, it said.

The Central Bank also uncovered cases where lenders failed “to recognise clear indications of a borrower’s financial difficulty”.

Lenders in some instances failed to record or appropriately address complaints or provided minimal assistance in completing standard financial statements, which are required as part of the process for dealing with arrears.

The regulator’s review also identified “excessive contact attempts based on borrower circumstances”.

“We have set out to the firms we regulate the improvements they need to make. As well as dealing with the deficiencies we identified, we have also called out examples of good practice we witnessed in firms’ websites; their use of plain English paperwork and prepaid return envelopes; incentives for borrowers and crucially, staff demonstrating empathy and willingness to accommodate borrowers through particularly difficult situations such as bereavement,” the Central Bank’s director of consumer protection Colm Kincaid said.

“It is critical that firms make these improvements to meet their responsibilities to support consumers in, or facing, mortgage arrears and avoid the risk of those arrears becoming longer term. This needs to be a priority for all firms,” he said.

The Central Bank has been criticised for failing to adequately protect borrowers with nonbank lenders who have seen a large pickup in borrowing costs in recent years.

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times

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